U.S. airlines call for cash grants in the bailout package
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U.S. airlines called for cash grants rather than just tax payer-backed loans from the government on Friday, warning that around 750,000 jobs depend on the airline industry. /VCG

U.S. airlines called for cash grants rather than just tax payer-backed loans from the government on Friday, warning that around 750,000 jobs depend on the airline industry. /VCG

U.S. airlines called on Friday for a government stimulus package to help them weather the coronavirus crisis by providing payroll protections, warning that around 750,000 jobs depend on the airline industry.

A proposal introduced in the U.S. Senate on Thursday would grant up to 50 billion U.S. dollars in secured loans, but U.S. airlines believe that the loans aren't enough to support their long-term health, since even after the virus outbreak is contained globally, the demand for travel will still be in slump amid a probable recession. They argued that cash grants that can cover labor costs could really help them come out the other side of the coronavirus outbreak. 

"Loans alone are not sufficient and should be coupled with a worker payroll assistance program and targeted tax relief which will allow airlines to keep operating through this crisis," industry body Airlines for America said in a statement.

Chicago-based United warned that without sufficient government support by the end of March, it would have to start cutting its payroll to match a 60 percent schedule reduction planned for April, saying "time is running out."

Late on Friday, United said it was now cutting 95 percent of its international flights in April, including suspending all flights next month to Canada, Europe, Central and South America and Africa and nearly all flights in Asia.

Airlines have already raised capital, suspended share buybacks, cut executive pay, slashed flights and grounded jets to reduce costs and preserve cash during a steep erosion in air travel demand.

Even with these "self-help measures," Delta Air Lines Chief Executive Ed Bastian said on Friday his airline was burning through 50 million U.S. dollars in cash each day. Delta expects its revenue to fall by 10 billion U.S. dollars in the second quarter from a year earlier.

U.S. President Donald Trump has said he stands ready to support the industry, but the idea of a bailout has met with a backlash from some critics who argue the airlines should have saved more cash for a rainy day, rather than rewarding shareholders.

"Whatever they ask for will be very controversial," said Al Koch, vice chairman of AlixPartners, who was involved in the restructuring of General Motors in 2008-09. "It's one thing for Trump to say we'll stand behind airlines, and another thing for Congress to enact something into law."

On Friday, the U.S. Republican Senator Rick Scott of Florida argued that the U.S. tax payers shouldn't be bailing out large corporations that have enjoyed years of growth and prosperity.

Around 100 Democrats in the House of Representatives signed a letter to their leadership calling for restrictions on how the bailout money will be used. The tax payers' aid should be restricted to basic protections for frontline workers, including contractors. 

Meanwhile, union groups continued to lobby for any stimulus package to guarantee protections for frontline employees.

To protect workers, Association of Flight Attendants-CWA President Sara Nelson is pushing for direct payroll subsidies for employees, ranging from wheelchair assistants and gate agents to mechanics and flight attendants.

In a letter to Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer on Friday, a dozen lawmakers said that basic protections for frontline workers, including contractors, were "a moral obligation," but added that airlines should not receive "a blank check."

Talks in Congress concluded Friday without an agreement, but congressional negotiators will resume talks on Saturday.

Source(s): Reuters